2018 has been a good year for equity markets so far. Just like other major indices, the ALSI has shown good growth after a month-long losing streak in 2017 between mid-November and Mid December.
Now I am not going to go into whether we are heading for some sort of crash or if the global markets are propped up to exhaustion level, but based on the ALSI’s technicals, in my opinion, we are probably going to be seeing a short-term reversion.
So let’s look at the ALSI futures daily chart.
There have been a number of tests of the 61.8 Fibonacci level with Monday’s candle opening above this level for the first time after 4 previous attempts.
Should a strong break above this level occur, the price could reach the top Bollinger band at the 54,000 area. I, however, think that this will be an extremely difficult area to break through as it is hard to believe that the market will remain so overbought for an extended period of time.
A break below the 61.8 Fibonacci level would be indicative of a sell-off and the next logical target would be the 50 Fibonacci level targeting the 53,000 area which is also the mean Bollinger level
The 50 Fibonacci level will be tough to break below, but should this level be broken, the price could possibly drop to the 38.2 Fibonacci level at the 52,000 area.
The stochastics oscillator is also in an extremely overbought scenario, adding further confluence for a potential reversal.
In summary, there are three indications of a potential reversal
- Bearish tendencies at a major resistance area (61.8 Fibonacci level)
- Stochastics overbought
- Price is close to touching the upper Bollinger band